The cannabis sector's Q3 performance has been a mixed bag, but two companies stood out for their exceptional financial performance: Green Thumb Industries (OTC:GTBIF) and Glass House Brands (OTC:GLASF).
Both delivered top-tier results, ranking in the top five for key financial metrics, including adjusted EBITDA, operating cash flow, and free cash flow.
- Get Benzinga’s exclusive analysis and the top news about the cannabis industry and markets daily in your inbox for free. Subscribe to our newsletter here. You can't afford to miss out if you’re serious about the business.
Leading The Pack: GTI And Glass House Top Rankings Across Key Financial Metrics
Green Thumb and Glass House have emerged as leaders in Q3, securing top-five spots across all four critical margin metrics: adjusted EBITDA, operating cash flow, free cash flow, and operating margin. This means that both Green Thumb and Glass House are not only generating strong profits but also effectively managing their cash flow and operational costs
Other companies that performed well include Grown Rogue (OTC:GRUSF), which repeated its strong results in adjusted EBITDA and operating cash flow, and Vext Science (OTC:VEXTF), which made a significant leap into the top five for both metrics.
According to a December 5 report from Beacon Securities, Vext has moved into the top five for both adjusted EBITDA and operating cash flow, thanks to strong operational improvements and a focus on cost efficiency. The company's growth was driven by expanding its market presence and optimizing its business structure to improve overall profitability.
Read Also: Europe Says Thanks But We’ll Do It Ourselves – Canada Leads In Raw Cannabis Exports, Not Oil
Tax Strategies And Market Trends Enhance Cash Flow
A key theme in the Q3 report is the ongoing role of tax strategies in enhancing operating cash flow. A notable 85% of the companies analyzed achieved positive adjusted EBITDA for the quarter, an increase from 81% in Q2.
The benefits of tax reforms, including moves to reduce 280E tax obligations, were evident as 65% of companies reported positive operating cash flow after working capital, up from 59% in Q2. These tax maneuvers have allowed operators to release working capital and generate higher cash flow, a crucial advantage in an industry where cash is king.
However, not all companies were able to convert EBITDA to operating cash flow as efficiently.
Beacon's analyst noted only 15 out of 26 operators were successful in making this conversion on a trailing twelve-month basis, a decline from 19 in Q2. Planet 13 (OTC:PLNH) and Trulieve (OTC:TCNNF) were among the leaders in converting EBITDA into positive cash flow, partly due to favorable tax strategies.
Read Also: DEA’s Cannabis Rescheduling Hearing Set To Begin In January 2025 As Controversy Mounts
Industry Outlook: Will The Momentum Continue?
Looking forward, the cannabis industry faces the challenge of maintaining positive cash flow in the face of rising costs and margin pressures. While the third quarter saw positive cash flow for many operators, seasonality and tax strategy releases likely played a significant role in the improvement. As the year progresses, companies will need to stay focused on tax optimization and cost control to sustain profitability in an increasingly competitive market.
